CEMEX(US:CX)2019-04-25 01:37Financial Position and Debt Management - As of December 31, 2018, total debt plus other financial obligations amounted to Ps207,724 million (U.S.$10,571 million), with 7% classified as short-term and 93% as long-term[27]. - As of December 31, 2018, 64% of total debt was denominated in U.S. Dollars, 26% in Euros, 5% in Pounds Sterling, and 2% in Philippine Pesos[27]. - The company reported a consolidated leverage ratio requirement of not exceeding 4.75:1 for certain periods, tightening to 4.25:1 for subsequent periods[64]. - The company faces significant debt maturities, including Ps116,794 million (U.S.$5,944 million) maturing after 2022, which may require refinancing[74]. - The company may not be able to generate sufficient cash to service all indebtedness or satisfy short-term liquidity needs, potentially leading to adverse actions[77]. - The company is subject to negative covenants that restrict its ability to incur additional debt, create liens, or enter into mergers[65]. - The company has pledged capital stock of subsidiaries as collateral to secure payment obligations under the 2017 Credit Agreement, with collateral valued at Ps172,617 million (U.S.$8,785 million)[73]. - The company has completed several capital markets transactions and asset disposals to improve liquidity and reduce outstanding debt under the 2009 Financing Agreement[26]. Strategic Plans and Operational Goals - The company aims to divest between U.S.$1.5 billion and U.S.$2 billion in assets by 2020 as part of its strategic plan to enhance shareholder value[28]. - The strategic plan also targets recurring operational improvements of U.S.$230 million by 2020 and a reduction of debt by U.S.$3.5 billion during the same period[28]. - The company’s strategic plan aims to fortify its position as a leading global heavy building materials company and accelerate its path to investment grade[28]. Economic and Market Conditions - The company has experienced adverse effects on operations due to economic downturns in the United States and other regions, particularly following the 2007-2008 financial crisis[24]. - The company’s operations are significantly influenced by economic conditions in various regions, including the United States, Mexico, and Europe, which may impact financial performance[31]. - Emerging markets are vulnerable to financial volatility, with risks of capital outflows and currency depreciation due to high U.S. Dollar-denominated corporate debt[38]. - Mexico's economic growth forecast for 2019 and 2020 has been reduced, which may adversely affect demand for the company's products[39]. - The ratification of the USMCA is pending, and failure to ratify could negatively impact Mexico's access to the U.S. market and investment confidence[40]. - Increased border control measures between the U.S. and Mexico could lead to higher costs and impact service quality, adversely affecting the company's operations[41]. - Economic conditions in China remain uncertain, with potential adverse impacts on demand and output due to external triggers and high credit growth[43]. - Colombia's economic activity is expected to improve slightly, but risks such as oil price fluctuations and civil works investment could affect future growth[44]. - Political instability in Nicaragua may lead to a severe economic downturn, negatively impacting the company's operations in the region[45]. - The Eurozone faces economic deceleration and risks related to negative deposit rates, which could adversely affect the company's results in Europe[46]. - Brexit uncertainty continues to impact economic activity in the UK, with potential disruptions to trade relations and increased costs for the company[48]. - General global economic conditions remain challenging, and any deterioration could adversely affect the company's financial condition and results of operations[57]. Financial Performance - Revenues for 2018 reached Ps 276,855 million, representing a 7.5% increase from Ps 257,437 million in 2017[176]. - Gross profit for 2018 was Ps 93,890 million, up from Ps 88,579 million in 2017, indicating a growth of 3.0%[176]. - Operating earnings for 2018 were Ps 27,359 million, a decrease of 4.9% compared to Ps 28,797 million in 2017[176]. - Basic earnings per share for 2018 were Ps 0.22, down from Ps 0.34 in 2017, reflecting a decline of 35.3%[176]. - Total assets as of December 31, 2018, were Ps 552,628 million, a decrease from Ps 567,691 million in 2017[176]. - Total debt plus other financial obligations decreased to Ps 207,724 million in 2018 from Ps 226,216 million in 2017, a reduction of 8.0%[176]. - Operating margin before other expenses for 2018 was 12.0%, down from 12.7% in 2017[176]. - Cash and cash equivalents decreased to Ps 6,068 million in 2018 from Ps 13,741 million in 2017, a decline of 55.8%[176]. - The ratio of Operating EBITDA to interest expense improved to 3.9 in 2018, up from 2.5 in 2017[176]. - CEMEX reported an Operating EBITDA of Ps49,266 million for the year ended December 31, 2018, compared to Ps48,600 million in 2017, reflecting a year-over-year increase of 1.4%[182]. Operational Challenges and Risks - The company is subject to risks from changing economic, environmental, political, and regulatory conditions that could adversely affect its business and financial condition[30]. - The company faces liquidity risks if unable to complete debt or equity offerings or if cash flow proves inadequate[82]. - CEMEX's financial and operational flexibility may be reduced due to more restrictive covenants imposed on sub-investment grade entities[89]. - The company has historically sought waivers and amendments to its debt instruments, which may be necessary in the future depending on compliance with financial ratios[81]. - The company faces potential adverse effects on its business due to changes in laws and regulations, which may require significant resources to adapt operations[104]. - The company relies on third-party providers for necessary approvals, licenses, and permits, and any delays or failures in obtaining these could materially impact operations[105]. - The company uses by-products from industrial processes, and any disruption in supply could lead to increased sourcing costs, adversely affecting financial performance[106]. - High energy and fuel costs are a significant part of the company's cost structure, and market volatility could adversely impact operating results[110]. - The introduction of substitutes for traditional construction materials could negatively affect demand and pricing for the company's products[112]. - The company operates in highly competitive markets, and failure to compete effectively could result in loss of market share and revenue decline[113]. - A substantial portion of the company's assets consists of intangible assets, including goodwill, which may be subject to impairment charges if market conditions deteriorate[117]. - The company is involved in various legal proceedings that could harm its reputation and operational capabilities[121]. - The effectiveness of the company's internal control over financial reporting is critical, and any weaknesses could lead to material misstatements in financial statements[122]. - The company is subject to stringent environmental laws and regulations, which could lead to substantial costs and liabilities, impacting profitability[125]. - Compliance with the Portland Cement NESHAP is ongoing, with a compliance deadline set for September 2015; failure to meet these standards could adversely affect business operations and financial condition[126]. - The CISWI rule imposes potentially more stringent emissions limits, with a compliance date established for February 2018, which could materially impact operations if certain alternative fuels are used[127]. - The company faces risks from geopolitical tensions in regions such as the Middle East and Asia, which could adversely affect operations and financial condition[134][139]. - Adverse weather conditions and natural disasters significantly impact demand for products, particularly during winter months, and can lead to material adverse effects on results of operations[143]. - Prolonged disruptions to production facilities due to various factors could adversely affect operations and financial condition[145]. - The company evaluates the need for environmental impairment insurance to mitigate financial consequences from environmental incidents, but coverage may not be sufficient[130]. - Political risks in countries of operation, including potential expropriation and nationalization, could materially affect business operations and financial condition[134]. - The company is exposed to economic risks from climate change regulations, which could lead to increased costs and impact access to capital[130]. - The company’s operations in Egypt have been adversely affected by political and social turmoil, which could continue to impact economic activity and operational stability[134]. Human Resources and Governance - The company faces potential liabilities related to health and safety issues, which could adversely impact its reputation and financial condition[150]. - Labor activism and unrest may affect the company's operations and financial results, particularly in Mexico where union activities are expected to increase[151]. - The company may face challenges in attracting and retaining qualified employees, which could hinder its operational success and growth opportunities[157]. - The board of directors and key management are critical to the company's success, and their loss could adversely affect operations and financial results[156]. - Insurance coverage may not be sufficient to cover all potential losses, including those related to cyber-security and natural disasters[155]. - The company is subject to anti-corruption and anti-bribery laws, with violations potentially leading to significant penalties and reputational damage[158]. Shareholder and Market Considerations - CEMEX, S.A.B. de C.V. must hold Series A shares in a trust for non-Mexican investors, limiting direct ownership[167]. - The CPO trust for non-Mexican investors is set to expire on September 6, 2029, potentially requiring a new trust to maintain economic interest in Series A shares[167]. - ADS holders may face dilution as they may not be able to exercise preemptive rights during future equity offerings[169]. Acquisitions and Divestitures - The company completed the sale of its operations in Austria and Hungary for €165 million (approximately $179 million) on October 31, 2015, resulting in a gain on sale of $45 million[196]. - The company sold its operations in Bangladesh and Thailand for $70 million on May 26, 2016, with a gain on sale of $24 million[196]. - The company divested its cement plant in Odessa, Texas, and other assets for $306 million on November 18, 2016[198]. - The company sold its Concrete Pipe Business for $500 million plus an additional $40 million contingent consideration based on future performance[198]. - The company increased its interest in Lehigh White Cement Company from 24.5% to 36.75% for a total consideration of $36 million[200]. - The company acquired shares of Procon Readymix Ltd for an amount equivalent to $22 million in August 2018[200]. - The company sold its Brazilian operations for $31 million on September 27, 2018[200]. Revenue Breakdown - The geographic breakdown of revenues for the year ended December 31, 2018, showed the United States contributing 24%, Mexico 21%, and the United Kingdom 7%[203]. - Revenue breakdown by line of business for the year ended December 31, 2018, indicated Cement at 43%, Ready-Mix Concrete at 40%, and Aggregates at 17%[205].